Varcoe: 'They must again down' — Alberta, oilpatch gear up for conflict over Ottawa's emissions cap

A protracted-simmering brawl over the cap, between the feds on one facet and the Alberta authorities and business on the opposite, is now totally underway

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The oilpatch emissions cap cometh, ushering in a Titanic wrestle between the federal authorities, the province and the nation’s oil and fuel sector.

After two years of intense dialogue, fierce debate and profound disagreement, the Trudeau authorities introduced Thursday its new framework to cap after which reduce greenhouse fuel emissions from the nation’s oil and fuel business. Ottawa billed it as the primary such coverage on this planet from a serious producing nation.

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A protracted-simmering brawl over the cap, between the feds on one facet and the Alberta authorities and business on the opposite, is now totally underway.

Ottawa will undertake a cap-and-trade system by way of laws below the Canadian Environmental Safety Act, aiming to wrestle down emissions within the sector by an anticipated 35 to 38 per cent by the tip of the last decade (from 2019 ranges).

Trade leaders expressed frustration with the plan, whereas the Smith authorities vowed to assemble a constitutional “protect” to cease it, which might contain utilizing the province’s sovereignty act.

Federal Pure Assets Minister Jonathan Wilkinson mentioned he expects manufacturing to rise as emissions fall below the plan, however Premier Danielle Smith insisted it’s a manufacturing cap that deliberately assaults the province’s financial system and will result in a nationwide unity disaster if Ottawa proceeds with it.

“There’s no query that in the event that they proceed on this path, it’ll find yourself in courtroom and I feel we’ll win,” Smith informed reporters Thursday from Dubai, the place she’s attending the COP28 local weather convention.

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“We face a disaster of the federal authorities’s making, which is why they must again down.”

First promised by the federal Liberals through the election marketing campaign two years in the past, the coverage proposes to cut back business emissions sharply by way of this decade because the nation goals to achieve internet zero by 2050, a aim that has been adopted by Alberta and far of the business.

A cap-and-trade system will set a restrict on business emissions by establishing a complete quota of allowable emissions, which might decline over time, with the federal government distributing free allowances to regulated amenities.

Smith identified the province has the unique constitutional proper to make legal guidelines on the event of its pure sources.

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The oil and fuel sector was accountable for about 28 per cent of all emissions in Canada in 2021. With rising considerations about local weather change, environmental teams largely applauded the transfer.

“This emissions cap will lastly immediate oil and fuel firms to divert document earnings into main investments in decarbonization,” Janetta McKenzie of the Pembina Institute mentioned in a press release.

“Current insurance policies are usually not sufficient.”

The sector is lowering emissions per barrel as international demand has reached document ranges this yr. The business is a big job creator — using 412,000 Canadians straight and not directly final yr — whereas producing 30 per cent of Canada’s exports.

Ottawa estimates the cap will cowl about 85 per cent of all emissions within the upstream oil and fuel business in 2021. The coverage will apply to standard oil and pure fuel, offshore manufacturing and oilsands, in addition to LNG amenities, however to not downstream refining and distribution.

The federal authorities identified the plan will embrace a number of flexibility measures, permitting firms to purchase a restricted variety of carbon offset credit, or contribute to a decarbonization fund in the event that they exceed their allowances.

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In an interview, Wilkinson mentioned it’s not sure if the cap will apply to particular person wells or small producers, noting this can be a framework and draft laws can be developed subsequent yr. Reporting and verification necessities for the cap would begin as early as 2026.

The federal minister doesn’t assume the coverage will result in funding {dollars} flowing south of the border, saying that threat is “very low.”

“We labored very exhausting to make sure that that is centered on emissions and never on manufacturing . . . It primarily will operate as a backstop. You set your cash the place your mouth is, you do the issues that you simply say you’re going to do — or there’s a requirement that you simply really do them,” Wilkinson added.

“We’re fairly assured within the federal authorities’s potential from a jurisdictional perspective to deliver this into place.”

Jonathan Wilkinson
Jonathan Wilkinson, minister of pure sources, speaks throughout a federal authorities announcement in Calgary on Monday, June 19, 2023. Gavin Younger/Postmedia

Trade response was swift.

Oilpatch veteran Hal Kvisle, the previous CEO of TransCanada Corp. and Talisman Power — and a director with a number of oil and fuel producers — known as the emissions cap an “ill-conceived transfer” by the federal authorities.

“None of our rivals in the USA are dealing with cap-and-trade restrictions,” mentioned Kvisle.

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“It’s each bit as unhealthy because the NEP.”

If the cap causes funding within the sector to shift to different jurisdictions, it’ll result in fewer jobs and funding in Canada, warned Kevin Neveu, CEO of Precision Drilling Corp., the nation’s largest driller.

Whereas it gained’t doubtless have an effect on 2024 spending choices, it’ll make it more durable for firms to plan medium and long-term investments.

“It is a slim coverage and it’s ready below the route of an environmental activist. It’s solely centered on financially impairing the Canadian oil and fuel producing business,” mentioned Neveu.

“This may end in investments being redirected and jobs being redirected away from Canada.”

Kevin Neveu
Kevin Neveu, CEO of Precision Drilling Corp. Postmedia file

There’s loads on the road for all sides.

The Pathways Alliance, a gaggle of main oilsands producers working to attain net-zero emission by 2050, is creating a proposal to construct a $16.5-billion carbon seize community connecting the oilsands to a storage hub close to Chilly Lake.

The alliance’s president mentioned the group will analyze the federal framework, however Kendall Dilling believes the present nationwide carbon value and Alberta’s industrial emitters program “already offers applicable regulation to drive emission reductions towards internet zero by 2050.

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“Imposing an emissions cap, with extra regulatory complexity, does nothing to advance the knowledge obligatory for the deliberate multibillion-dollar decarbonization initiatives to proceed,” he mentioned in a press release.

In the meantime, producers mentioned the coverage might result in oil and fuel output being shut in or future development being stymied.

“We’re very dissatisfied,” mentioned Tristan Goodman, president of the Explorers and Producers Affiliation of Canada.

“It might have manufacturing implications. I feel due to that, it’s doubtless unconstitutional, regardless of what the federal authorities is saying, and there’s going to be plenty of authorized motion related to this.

“And much more combating to come back.”

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